In this article, we present the list of the 10 best tech stocks to buy now according to Nishkama Capital.
Ravee Mehta’s Nishkama Capital is a long/short equity hedge fund based out of Dorado, Puerto Rico. The fund primarily invests in technology and telecommunications stocks but tries to avoid new positions in companies that already have a large hedge fund presence. Given that preference, Nishkama Capital does invest in numerous smaller tech companies, though it seeks out stocks that can be 95% liquidated within a month to provide it with added flexibility and security.
The Nishkama Capital Fund LP, which was launched in June 2013, has delivered compound annual returns of 8.36% through March 2020. The fund had five solid years in a row from 2015 to 2019, posting gains of no less than 6.38% each year, but only topping 7.67% once during that time. Nishkama Capital had $435 million in assets under management as of June 2021.
As Nishkama Capital’s expertise lies in tech stocks, we’ve compiled a list of its ten favorite stocks in that sector according to the fund’s latest filing with the SEC for the reporting period of September 30, 2021. Just under half of Nishkama’s 13F portfolio assets were devoted to tech stocks at that time, a big jump from just 31% at the end of June 2021 as Nishkama pared down its portfolio, which was valued at $343 million at the end of September.
As of the third quarter of 2021, Nishkama Capital owns several important tech stocks, including Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOGL) and Workday Inc. (NASDAQ:WDAY).
Let’s check out the 10 best tech stocks to buy now according to Nishkama Capital.
Photo by Behnam Norouzi on Unsplash
Best Tech Stocks to Buy Now According to Nishkama Capital
10. Paymentus Holdings, Inc. (NYSE:PAY)
Nishkama Capital was one of 12 shareholders of Paymentus Holdings, Inc. (NYSE:PAY) as of September 30 among the hedge funds tracked by Insider Monkey after buying a stake of 190,000 shares of Paymentus Holdings, Inc. (NYSE:PAY) during Q3. That was the same number of hedge funds that owned the stock after its Q2 IPO.
Clearbridge Investments was one of the funds to grab a stake in PAY’s IPO and discussed Paymentus Holdings, Inc. (NYSE:PAY) in its Q2 investor letter, describing the IPO market as a great source of fresh new ideas and noting that the payment company is targeting more consumer-friendly channels with its streamlined invoicing software, which could allow it to capture some underserved areas of the payments market.
ClearBridge Investments released its Q2 2021 investor letter and highlighted Paymentus Holdings, Inc. (NYSE:PAY). Here is what the fund said:
” The new issue market remains an attractive source of new ideas and we participated in four IPOs in the latest period. Paymentus is a payment company using invoicing in more consumer-friendly channels. The company’s services allow a utility to send a customer a text message to connect a bank account and pay their bill. Paymentus is expanding its streamlined payment process to SMBs like gardeners and local merchants.”
9. Alphabet Inc. (NASDAQ:GOOGL)
Alphabet Inc. (NASDAQ:GOOGL) is one of Nishkama’s few tech stock holdings that need little introduction to the layman. Nishkama owned 1,912 of the search giant’s class A shares on September 30 after unloading 44% of its stake in Google during Q3.
Hedge funds were certainly right about Alphabet Inc. (NASDAQ:GOOGL) in 2021, as Alphabet Inc. (NASDAQ:GOOGL) that ranks as one of the hedge fund industry’s favorites gained 67.65%. While it was Google’s search engine that made it a household name initially, it’s now Alphabet Inc. (NASDAQ:GOOGL)’s cloud computing business and Google Play Store which are driving margins higher and impressing investors so greatly, while its video platform YouTube continues to generate strong user growth.
8. ON24, Inc. (NYSE:ONTF)
Nishkama Capital also opened a new stake during Q3 in another tech company with a recent IPO, ON24, Inc. (NYSE:ONTF), buying 286,926 shares of the webcasting platform. Rather than being a new upstart, ON24 has been around for over two decades but enjoyed accelerated interest and growth thanks to the Covid-19 pandemic which prompted it to finally go public 23 years after its founding.
The wait’s been anything but worth it for ON24, Inc. (NYSE:ONTF) and its investors, however, as the stock has sunk like a boulder since its IPO, losing over 75% of its value. In addition to Nishkama, several other hedge funds looked to capitalize on the depressed stock price during Q3, as there was a 62% jump on hedge fund ownership of ON24, Inc. (NYSE:ONTF) during the quarter. The stock has yet to rebound, however.
7. Workday, Inc. (NASDAQ:WDAY)
Nishkama Capital bought 26,949 shares of Workday Inc. (NASDAQ:WDAY) during Q3, opening a new stake in the enterprise software company that was worth $6.73 million on September 30. Hedge funds have been piling into Workday Inc (NASDAQ:WDAY) over the past few years, as there’s been a 350% surge in ownership of the stock since the middle of 2017.
Workday Inc (NASDAQ:WDAY) had a strong third quarter of 2021, earning $1.10 per share, beating estimates by over 20%, while its revenue rose by 20% year-over-year to $1.33 billion.
6. Semtech Corporation (NASDAQ:SMTC)
Semtech Corporation (NASDAQ:SMTC) closes out the first half of our list of Nishkama’s Capital’s favorite tech stocks, as the fund bought a new stake in Semtech Corporation (NASDAQ:SMTC) during Q3 comprised of 110,817 shares valued at $8.64 million at the end of Q3. The semiconductor maker has enjoyed a recent surge in hedge fund ownership, hitting 29 at the end of Q3 after bottoming out at just 11 hedge funds long SMTC at the end of 2019.
In addition to Microsoft Corporation (NASDAQ:MSFT) Alphabet Inc. (NASDAQ:GOOGL) and Workday Inc. (NASDAQ:WDAY) , SMTC is a notable tech stock in Nishkama Capital’s Q3 portfolio.
Semtech Corporation (NASDAQ:SMTC) posted record numbers pretty much across the board in Q3, setting new highs for net sales, operating income, diluted EPS, gross margins, and cash flow. Semtech Corporation (NASDAQ:SMTC)’s guidance also topped estimates as it anticipates a record year in 2022 on its mission to eventually drive net sales to $1 billion annually.
5. Analog Devices, Inc. (NASDAQ:ADI)
Analog Devices, Inc. (NASDAQ:ADI) is first up on the second half of our list of Nishkama Capital’s favorite tech stocks. The fund owned 69,797 ADI shares on September 30, a 78% jump from the end of June and with the holding valued at $11.69 million at the end of Q3. There’s been a three-fold increase in hedge fund ownership of Analog Devices over the past three years.
Madison Funds, an investment management firm, published its “Madison Investors Fund” third-quarter 2021 investor letter and highlighted Analog Devices, Inc. (NASDAQ:ADI). Here‘s what the fund said:
“At its 2017 investor day, Analog Device’s VP of Automotive, Mark Gill, described how the company’s content on well-equipped electric vehicles was $600 per car compared to $250 per car for the traditional 2017 internal combustion engine car. Since then, Analog has highlighted the success of its EV battery management systems (BMS) product nearly every quarter. The BMS product is hardware and software that manages the power into and out of the battery systems. It’s the brains of the operation. Analog says it’s on its fifth generation BMS product, that it has the no. 1 market share in high voltage products, and that it is on 5 of the top 10 selling EVs. While we think that the BMS product is just 1 to 1.5% of Analog’s product mix, we think that it could add nearly a point of revenue growth per year to the company’s top-line given the expected ramp in EV production. This is a material amount of growth atop an already nicely growing company revenue line.”
4. Celestica Inc. (NYSE:CLS)
Nishkama Capital raised its stake in Celestica Inc. (NYSE:CLS) by 18% during Q3, giving the fund over 1.64 million shares valued at $14.6 million on September 30. Celestica hasn’t been overly popular among hedge funds but the stock did see a 50% jump in ownership to 21 funds during Q3, hitting an eight-year high.
The Q3 surge in hedge fund ownership of Celestica Inc. (NYSE:CLS) may have been due to the company’s late September acquisition of PCI Limited for $306 million in cash. That acquisition closed at the beginning of November, accelerating Celestica’s high-margin, high-growth strategy and giving the Canadian multinational corporation a stronger foothold in the lucrative Asian market.
3. Ceridian HCM Holding Inc. (NYSE:CDAY)
Nishkama sold off 41% of its Ceridian HCM Holding Inc. (NYSE:CDAY) position during Q3 but that still left the fund with a holding of 188,634 shares valued at $21.24 million on September 30. It is the fund’s fourth-largest long position as of the end of Q3 after ranking as its second-largest at the end of June.
Artisan Partners discussed Ceridian HCM Holding Inc. (NYSE:CDAY) in its Q3 investor letter, noting that it began investing in the payroll software company back in 2019 as it began its transition to a subscription model. The fund expected that transition to greatly improve margins and has been equally impressed with the company’s sales growth, which grew by 30% year-over-year in Q2. Furthermore, the fund believes that Ceridian’s cloud platform Dayforce still has a substantial growth runway ahead of it.
2. Microsoft Corporation (NASDAQ:MSFT)
Nishkama made a rare purchase in a hugely popular stock during Q3, opening a stake in Microsoft Corporation (NASDAQ:MSFT) of 121,422 shares valued at $34.23 million at the end of September. Microsoft has consistently ranked as one of the most popular stocks among hedge funds, with 253 of them long MSFT on September 30.
Microsoft Corporation (NASDAQ:MSFT) has rewarded those shareholders greatly in recent years, gaining over 420% in the last five years. Nishkama clearly believes that further gains are in store given its large investment as the tech giant continues to grow adoption and engagement among its various services, including its Office suite of software tools and its Azure cloud platform.
ClearBridge Investments, an investment management firm, published its “Sustainability Leaders Strategy” third quarter 2021 investor letter, and highlighted Microsoft Corporation (NASDAQ:MSFT). Here‘s what the fund said:
“The Strategy modestly outperformed the benchmark; consistent with our fundamental approach that seeks balanced exposure to industries and the growth and value spectrum, performance was driven by companies from diverse sectors. Microsoft, which develops software including the Windows family of products, the Microsoft Office system and the Azure cloud platform, and is a leader in data protection and customer privacy as well as human rights and diversity, contributed strongly as earnings maintained positive sentiment. Microsoft is seeing a number of businesses reach a new, higher level of engagement, adoption and momentum.”
1. Flex Ltd. (NASDAQ:FLEX)
Topping the list of Nishkama Capital’s top tech stock picks is Flex Ltd. (NASDAQ:FLEX), which surged to the front of the fund’s 13F portfolio after it added 331% more shares to its previous holding in the third quarter. That gave the fund 2.41 million shares valued at $42.57 million at the end of Q3. It also gives Nishkama the greatest 13F exposure to the stock among all the hedge funds in Insider Monkey’s database, at 12.39%.
Like Celestica, Flex Ltd. (NASDAQ:FLEX) is also involved in the global supply chain and manufacturing segments, being a solutions provider for those industries. Flex has been able to greatly improve its results in recent years by selling off some of its low-margin businesses and focusing on high-growth segments like solar, electric vehicles, and 5G.
You can also take a peek at the Top 10 High Growth Stocks To Buy in 2021 and 15 Biggest Companies That Use Shopify.
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Disclosure: None. 10 Best Tech Stocks to Buy Now According to Nishkama Capital is originally published at Insider Monkey.
